A former Iranian official warns that the implementation of the government's economic reforms plan would deteriorate the financial system.
Tahmasb Mazaheri, the former governor of Iran's Central Bank, told Tabnak on Saturday that if the current proposals were hastily implemented, the inflation rate would skyrocket, possibly reaching to as high as 40 percent in the first year.
President Mahmoud Ahmadinejad's government is pushing through a plan under which the state subsidies for fuel, natural gas and electricity would be cut. The government instead would distribute cash among low-income families to compensate for the price hike caused by the plan.
Mazaheri, however, argued that since there are no proper mechanisms in place to improve the business activities in the country, the price hike would force the government and Majlis to take steps which would further increase the inflation rate.
Mazaheri said government employees who have a fixed income as well as businessmen and enterprises that have to work in a competitive market are most vulnerable to the negative impacts of the economic reforms plan.
Supporters of the plan say it is in line with global financial organizations' recommendations that Iran get rid of a heavily subsidized economy if it wants to solve its economic problems.
The former official said the plan would damage the country's economic structure and people's confidence. Such a scenario, according to Mazaheri, would shake the fundamentals of Iran's economic system and would lead to economic disintegration.
The former governor of Iran's Central Bank also dismissed the argument of the proponent of the plan that after a hike in the inflation rate following the implementation of the plan, it would be decreased to a single digit figure.
"The implementation of the plan would accelerate the trend of increase in the inflation rate," Mazaheri said.
The government's plan which sparked heated debates among its opponents and proponents is awaiting an approval by the Iranian parliament Majlis.